Top-rated Arbitrage Funds That You Should Look to Invest in!
Last Updated : Dec. 7, 2019, 2:56 p.m.
Want to invest in mutual funds at minimum risk? Then making an investment in the top-rated arbitrage funds could be the perfect choice for you. An arbitrage fund is nothing but a type of equity mutual fund that encashes the difference in the prices between cash and futures markets. While cash market price is the current trading price of any fund, futures market price is the one that fund managers estimate for a future date.
For example, the price of a fund is ₹ 500 in the cash market, while ₹ 1,500 in the future market, so the arbitrage will be ₹ 500 by buying it from the cash market and selling in the future market. It is just an example of how much return you can get via investing in top-rated arbitrage funds.
Talking about the rating of these arbitrage funds, it usually ranges from a score of 1 to 5. Top-rated Arbitrage funds generally tend to have a rating closer to 5. There are a few rating agencies in the country that give the rating to these funds. These ratings are based on the performance of the funds over different time frames with a comparison to other funds in the same category. You can have a look at some of the highest-rated Arbitrage funds below, so that you can decide the right one for you.
Performance of Highly Rated Arbitrage Funds
| Arbitrage Mutual Funds | Rating | 1-Year Return | 3-Year Return | 5-Year Return | 10-Year Return |
|---|---|---|---|---|---|
| Nippon India Arbitrage Fund | 5- Star | 6.38 | 6.30 | 6.71 | - |
| UTI Arbitrage Fund | 5- Star | 6.33 | 6.12 | 6.50 | 6.94 |
| Kotak Equity Arbitrage Fund | 4- Star | 6.24 | 6.18 | 6.56 | 7.38 |
| ICICI Prudential Equity Arbitrage Fund | 4- Star | 6.12 | 6.01 | 6.48 | 7.36 |
| IDFC Arbitrage Fund | 4- Star | 6.34 | 6.10 | 6.41 | 7.19 |
What is the Portfolio Composition in all these Top-Rated Arbitrage Funds?
| Arbitrage Mutual Funds | Top Equity Holdings | Top Debt Holdings |
|---|---|---|
| Nippon India Arbitrage Fund | Reliance Industries, TCS, Bajaj Finance, Bajaj Finserv, Hero Motocorp, Grasim Industries, ICICI Bank, etc. | Certificate of Deposits, Fixed Deposits, Debenture, Commercial Paper, Debenture, Non-convertible Deposits of HDFC Bank, Axis Bank, Federal Bank, etc. |
| UTI Arbitrage Fund | HDFC, Infosys, Lausen & Toubro, Bajaj Finance, IndusInd Bank, ITC, Axis Bank, Hindustan Unilever, etc. | Short-term deposit, Commercial Papers, Certificate of Deposits of Punjab National Bank, Axis Bank, Andhra Bank, etc. |
| Kotak Equity Arbitrage Fund | Reliance Industries, ITC, Hindustan Unilever, HDFC, Infosys, TCS, Grasim Industries, Larsen & Toubro, HCL Technologies, etc. | Term Deposits, Commercial Paper, Bonds/ NCDs, Non-convertible Debentures of IDFC First Bank, Federal Bank, etc. |
| ICICI Prudential Equity Arbitrage Fund | HDFC Bank, Reliance Industries, State Bank of India (SBI), Infosys, ITC, HDFC, Tata Consultancy Services, Axis Bank, Larsen & Toubro, Bharti Airtel, etc. | Certificate of Deposits, Commercial Papers, Fixed Deposits, Debentures of IndusInd Bank, Axis Bank, RBL Bank, Bank of Baroda, etc. |
| IDFC Arbitrage Fund | BPCL, Reliance Industries, Infosys, HDFC, ICICI Bank, SBI, Larsen & Toubro, Axis Bank, Asian Paints, Bajaj Finserv, GAIL, Grasim Industries, Petronet LNG, etc. | Fixed Deposits, Debenture, Non-convertible Debentures of Axis Bank, HDFC Bank, ICICI Bank, Federal Bank, National Housing Bank, etc. |
Who should Invest in these Arbitrage Funds?
An arbitrage fund suits perfectly to those who want to take a lesser degree of risk and get reasonable returns of around 6-7% on their investment. So the investors who want a lucrative return on their investment may not find these type of funds as suitable as an equity fund. The risk in arbitrage funds is minimized by hedging against the derivatives, that’s why there is not much risk investing in arbitrage funds. These funds give the best returns when the market is going through a volatile phase.
How can You Invest in Arbitrage Mutual Funds?
Now you’ve got enough information about the arbitrage mutual funds, you must want to know how can you make an investment in them. When we talk about the methods, there are two primary methods to invest in – Lumpsum and SIP (Systematic Investment Plan). You can choose any of them according to the availability of funds.
You can invest by any of these modes on the official website of the concerned Asset Management Company (AMC). Choose the fund in which you want to invest, go to that fund’s AMC website. There you will see the option to make an investment in the respective fund. Just fill a few details and your investment process will be completed.